Letter from the Chairman
Right as you read this our nation is grappling with the monstrousCoronavirus. The world as we know it is fighting a crisis that has brought everything toa standstill. And it is in these testing times the importance of water is keenly felt.With the water usage growing at double the rate of human population water stress is apressing issue that is still not being addressed. The shrinking water supplies across theglobe are raising an alarm some parts of the globe are already facing water crisismaking water management critical.
Creating a water-secure world is more important than ever today.
Various cities in India have been facing chronic water stress but therecent water crisis in Chennai gained global attention. To fight this the Company built aplant in Chennai which is a fully operational 45 MLD Tertiary treatment plant whichconverts sewage into usable water for industrial purposes. The Development like thesetranslate into bigger opportunities for a water technology company like WABAG.
Sustainability is the key to development both in concept and practice.It helps build a more robust competitive and resilient business in the long term.Despite the current economic challenges we continue to invest inR&D that makes ourbusiness more sustainable. An additional focus to the projects with long-term benefitswere encouraged by the centre for sustainable development. This support is intended toboost innovation and to improve our overall sustainability performance. It is ourresponsibility to help solve the growing water challenges to create a more sustainableplanet. It helps to contribute to the long-term growth in shareholder value.
I am pleased to note here that the strategies we have been putting inplace have mitigated some of the challenges. The Company is well-positioned to exploit theopportunities that arise in a growing economy. We are prepared to utilise our strengths inaddressing the water challenges by providing innovative solutions to our customers.
Water a vital component of growth and development
Over the years the Government has been undertaking various initiativesas measures and action plans to manage water. The Ministry of Power introduced a policywhich has mandated placement of a wastewater treatment plant within a 50 km radius of anindustry. This measure not only helps recycle the industry water but it also sends therecycled water back to the same industry. Initiatives like these are a major step towardswater conservation. The Hon'ble Prime Minister also emphasised on rainwaterharvesting.
All major urban areas have been suggested to statutorily andmandatorily harvest rainwater. Great emphasis has also been laid on desalination incoastal belts. Together these initiatives play a big role in promoting a water-savingculture. It doubles up as bigger opportunities for a water management company like WABAG.
Our state-of-the-art Research and Development centres have developedadvanced technologies to treat wastewater which can directly be used as water. There arewise opportunities for us under the National Mission for Clean Ganga. With the Jal ShaktiMinistry planning to replicate the model of Namami Gange to another 11 rivers we foreseea great scope of opportunities for the business of our Company.
Emerging markets emerging opportunities
With our focus on emerging markets we find a huge infrastructural gapthat needs to be addressed. With India having a vast coastline it becomes vital for us tomake the most of it. The deepening water crisis of India can be resolved usingdesalination technology which is used to covert seawater into potable water. Thistranslates into a reliable sustainable and perennial source of water for a country withwater shortage.
With India's 7800-km long coastline and NITI Aayog's (ournational think-tank) plan to build desalination plants along it poses a big role forcompanies like WABAG. We estimate desalination to gradually gain scope in most of theIndian states like Gujarat Tamil Nadu Karnataka and Andhra Pradesh. It is important forthe Government to work in tandem with the private sector for greater good of communities.I believe it is crucial to set up low-cost desalination plants in states suffering fromacute water shortage. But alongside we also need Government to plug-in the leakages inthe pipelines. We need to set up a national water grid along with a PAN-India network ofpipes. This will help us address the issue of uneven water distribution better.
During the year 2019-20 your Company implemented various CSR projectsfor the benefit of the communities. Happy to note that your company has gone beyond TamilNadu and made its CSR presence in Telangana State wherein a couple of community waterpurification plants were built and dedicated. Apart from this your Company has also builta Decentralized Waste Water Treatment Plant and Recycling at Warangal for the Low IncomeHousing Colony. This will be dedicated to the community once the Covid-19 restrictions areremoved.
In Bengaluru under the Civic Engagement Program WATSAN project wasimplemented which covered around 3000 students plus neighbouring communities. More than adozen civic projects were undertaken under the "I change my city" with water andsanitation themes. I feel this is indeed essential to educate the next generation and I amparticularly happy that we could focus on school children.
It is also heartening to learn that your Company in partnership with MS Swaminathan Research Foundation implemented water augmentation project which made asignificant impact in terms of increase in farmers' income cultivation of threecrops in a year and family members' employment in their own field instead ofmigration to city. Yet another interesting project is watershed development is beingimplemented in West Bengal and Tamil Nadu which would result in holistic development ofthe village watershed communities.
WABAG cares for the communities it operates in. We understand that truesuccess of our business is only when we play our part right in protecting the environmentfrom issues like climate change water scarcity and wastewater management. Sustainabilityis what helps us become more resilient to climate change. There are no shortcuts when itcomes to conserving the planet we live on. And with this one thought we are movingtowards creating a world with water for all.
We enter the new year as a stronger and more focused
Company. A Company with huge potential to make a difference at a timewhen our customers need us more than ever.
Let us thank our stars the Covid-19 pandemic is tapering off. I amproud our team has kept the ball rolling and stepped up to help control the spread of thisvirus. As circumstances continue to evolve I am confident in our ability to help ourcustomers and our communities successfully manage through the Coronavirus pandemic.
The world will continue to change and so will we finding better ways todo our work developing new capabilities and helping our customers thrive through what issure to be a dynamic decade.
We'll stay true to our core business principles as we move intothe future investing in our future while delivering to our customers our shareholdersand our communities.
B. D. NARANG MANAGING DIRECTOR'S PERSPECTIVE
I am incredibly proud of the determination and resilience shown by theWABAG Warriors. To the many heroes on the frontlines helping to ensure the health andwell-being of our communities around the world thank you. These are unique and tryingtimes for every one of us. And it has been inspiring to see the global community rallytogether to help solve this challenge. The WABAG team has its share of heroes as wellparticularly those employees on the frontline who have kept our operations running.Staying close to our commitment while adapting to the new normal WABAG Warriors areassuring a clean and healthy environment needed around the world. In these challengingtimes WABAG Warriors are at their very best and most resourceful.
It feels great to achieve a remarkable feat and share stage among thetop 10 Global Water Players. Today WABAG ranks 6th globally among the "World'stop 50 private water operators.
The year was busy for us as our key projects picked up pace. Thisenabled us to achieve good results and cash flows. But this good performance wasaccompanied by its own set of challenges as the Covid-19 pandemic threatened the world.
This caused a great sense of unease towards the end of the year2019-20. A considerable amount of economic disruption has already been experiencedcausing some of the major economies run into recession. On one hand the Governmentresponded to this crisis with significant intervention. While on the other businesses andorganisations rapidly started adjusting to the changing needs of their people customersand suppliers. All of this while navigating their way through the financial andoperational challenges. However even during these trying times while competingpriorities we as a Company remained resilient and committed to offering high-qualityservices. We stayed true to our commitment towards a better tomorrow.
The Company had a balanced performance during the year. A healthyimprovement in underlying operating margin at 9.6% along with strong operative cash flowat INR 245 crore resulted into good profitability. Our continued efforts in managingworking capital debt reduction improved collection cycle have equally added to the cashgeneration. I am happy to state that during the year the Company built a strong orderbook leading to improved revenue visibilty even in this tough economic scenario.
Our revenue from the operations for the FY 2019-20 stood at INR 2557crore and INR 1746 crore on a consolidated and standalone basis respectively. Theinternational business of our Company along with the domestic business performed better.
Consolidated order intake for FY 2019-20 was at INR 4350 crore. Netorders from overseas operations were INR 896 crore accounting for 21% of the total orderssecured during the year.
The Company's other new major orders secured during the year arealso in their early stages of execution. Revenues from new orders are expected to pick upmomentum in the next few quarters. Consolidated EBITDA and profit after tax attributableto owners of the parent stood at INR 246 crore and INR 91 crore respectively for theyear.
We are an Indian multinational player engaged in managing India'swater crisis as a priority. Our expertise in the technical integration of variousprocesses in desalination and water reuse supports us in our endeavour towards awater-secure world.
Today our order book stands at INR 11050 crore (including frameworkcontract) the highest in our 24-year history in India represents a strong order book.During the year we successfully commissioned the Koyambedu TTRO Plant in Chennaiinaugurated by the Honorable Chief Minister of Tamil Nadu in November 2019. This is alandmark project for the city of Chennai and for WABAG as the largest Water Recycle andReuse Plant in the country.
At our Dangote project in Nigeria engineering and equipment orderingis largely complete. Client has started issuing dispatch clearances for key equipment andthe dispatches are currently underway.
In our Polgahawela (Sri Lanka) project designs are approved and theproject is now in advanced stage of execution. The treatment plant intake structures andreservoirs have come above ground level and are progressing well. Supply of all keyequipment is complete. Also our first EXIM India funded (buyer's credit) project inDambulla Sri Lanka was executed successfully. It covered a 64 MLD water intake 32 MLDWTP as well as 6 water reservoirs and more than 300 km of transmission and distributionpipelines strengthening the Company's market presence in Sri Lanka.
In India we received One City One Operator' contract inUttar Pradesh in the cities of Agra and Ghaziabad for a period of 10 years expandable foran additional period of 5 years. This reaffirms governments trust on us as a competenttechnology partner for providing long-term sustainable solutions.
Talking about MEA a cluster of strategic importance the Companywishes to develop it as a global hub. Improved customer confidence and order inflowtraction are the major to reasons. At our Jubail STP Project in Saudi Arabia beingimplemented for Marafiq construction work is at peak. At our South Doha Project in Qatardetailed engineering is nearly completed all long lead items have been ordered andmanufacturing is in progress. In Zarat Project Tunisia detailed engineering is underwayand ordering of long lead items is nearing completion. We progressed well also in the
Europe cluster which is a saturated market.
We can treat any kind of water be it sea or freshwater or wastewater.Pioneer in Water Technology
Our innovative technologies and processes not only enhanceeffectiveness of renewable resources but also reduce adverse environmental impact. Ourobjective is to progressively increase the use of clean and green technologies and reducepollution through deployment of superior design operation and maintenance processes andthrough energy efficient alternatives leading to environmental conservation and costoptimisation. With business spread across varied geographies there is a constant need todevelop innovative ideas and technology to fulfil the need of the market. We have builtworld-class facilities which provide innovative solutions to various challenges. And thusit forms a strong pillar of our development. The Company was successful in pioneeringremoval of micropollutants which came in as a major landmark of achievement. We have alsolicensed and worked upon the NEREDA technology which we believe is going toplay a significant role in wastewater treatment in the future. While these kinds ofdemands come from developed countries the same standards could become mandatory for thedeveloping world too.
WABAG wants to stay on the cutting edge of water technology through itsthree state-of-the-art R&D facilities in Switzerland Austria and India because newtechnologies also mean more business. Closing Thoughts
As I look back on 2019 two words come to mind: gratitude andopportunity. I am deeply grateful to have such a committed and talented workforce. And Ibelieve we have an extraordinary opportunity to make a difference in the world.
Our businesses are well-positioned to benefit from the global trends ofrapid urbanisation and unprecedented growth in commercial segment. We have the sizescale and capability to thrive.
We are confident that we would be delivering strong growth on the backof the strong order book. Moving towards water smart infrastructure we intend onleveraging our geographical and inter-cluster synergies to provide total water solutionsat competitive prices. Also we would be focussing deeply into emerging markets forincreasing business profitability.
Our aim is to provide solutions that help extend the life span andusage of water. We will continue partnering with our customers to provide the most oflife's essential resource. We are also accelerating the pace of innovation andcontinually raising the bar on quality and execution will ultimately contribute tolong-term value for our shareholders. In closing I want to again express gratitude to ouremployees for a remarkable year. Thank you also to our valued customers and stakeholdersfor placing your trust in us and our products. We know you have options when you choosewhere to invest. Thank you for choosing WABAG. We look forward to your continued supportfor the upcoming years and beyond.